I have been bullish on the Cineworld (LSE: CINE) share price for a while now. So far, this bullishness has proven to be well-placed only in fits and starts. Even though the lockdowns have lifted and life is just about back to normal, Covid-19-impacted stocks are still extremely sensitive to developments related to the pandemic. This is visible in segments like travel, hospitality and, of course, entertainment.
Waning pandemic bodes well for the Cineworld share price
But, I think the worst might just be over for them, and in particular for Cineworld, which could be on a roll in 2022, in my view. Think about it. Covid-19 trends are generally heading in the right direction. Not only are many people around the world now vaccinated, we can even get booster shots. And consumer caution related to going to public places like cinemas could now reverse as a result.
Stock markets on fire
This could be one of the reasons driving up stock markets as well. The FTSE 100 index closed just shy of 7,400 yesterday. And if the trend continues, my prediction that it will touch 7,500 before the end of 2021 could soon be proved right. The FTSE 250 index, of which Cineworld is a part, is also on the rise. It is not back to the highs of early September, but current trends suggest it could soon reach 24,000 again. This could be good news for Cineworld stock, which has been showing enduring movement for the past few days.
Improvement in sectoral macro numbers
Also, the latest news on the UK’s economy bodes well for the business. The Office for National Statistics has just released underwhelming third-quarter growth numbers. Overall growth was a small 1.3% on a quarter-on-quarter basis. But this hides the fact that sectors like art and entertainment showed some impressive double-digit growth. This was to be expected since the lockdown was fully eased during the quarter and so much headway was made with vaccinations.
Now, the UK is not the biggest market for Cineworld. The UK and Ireland put together account for 18% of its revenue, which comes a distant second to the US’s 68% share. The company’s acquisition of Regal Cinemas gave it a big footprint in the US market a couple of years ago. Before this, the UK and Ireland accounted for over half its revenues.
Nevertheless, I think UK trends are indicative of the trends elsewhere as well. For example, growth in the US cooled down in the third quarter too, but personal expenditure on services grew by a healthy 7.9% from the quarter before. This could be an indicator of strong demand for cinemas’ services as well.
What I’d do about Cineworld in 2022
That does not mean it is clear skies ahead. The recovery could still falter, a coronavirus variant could still wreak havoc and investors could turn bearish again. But broadly, the outlook is significantly improved from even a year ago. I have bought the stock, and I might just buy more of it. 2022 may just be the year for it in my view.
